← The hardest concepts in United States law
In one breath
A federal court that hears a state-law claim must apply the state’s own substantive law and, where the state’s highest court has not spoken, must predict what that court would do. The prediction binds nobody in the state: its own courts remain free to decide the question differently later.
The picture
A father speaking as he thinks his child would
A father is asked to answer a question for his young daughter: would she like the blue room or the green one? He cannot ask her, so he reasons from what he knows of her and says, “She would choose the green one.” He is not choosing for himself. His whole job is to speak as she would, and if she has already told someone her answer, he must repeat it, even if he privately disagrees.
Nothing he says settles the matter for her. If she is later asked herself and answers blue, her answer stands and his guess is simply shown to have been wrong. A federal court deciding a state-law question stands where the father stands. The child is the state’s own law, spoken by the state’s own courts. The federal judge is a careful stand-in: bound to the child’s words where they exist, bound to a reasoned prediction where they do not.
Where the picture stops working
The picture stops at procedure. A father who speaks for his child still runs his own household, and a federal court still follows federal rules for how a case is run: pleadings, discovery, the timing of motions. Erie governs what the law says, not how the federal courtroom operates.
How it really works
- 1Erie matters when a state-law claim is heard in federal court, usually because the parties are citizens of different states or because a state claim was attached to a federal one.
- 2Ask whether a federal statute, the Constitution or a valid Federal Rule of Civil Procedure directly answers the point in dispute. If one does, it controls (Hanna v. Plumer).
- 3If not, ask whether the point is “substantive” in the Erie sense: would applying a different rule in federal court change the outcome, or send litigants shopping for a federal forum?
- 4Find the state’s law. A ruling of the state’s highest court on the question controls the federal judge. Lower state courts’ rulings are strong evidence of the law, not commands.
- 5If the highest court has not decided it, predict: look at lower-court decisions, the reasoning of other states, the leading treatises and the direction of the state’s law. Some states let federal courts ask their supreme court directly.
Why people get it wrong
- Believing a federal ruling on state law becomes the law of the state. It decides the case before it and may persuade, but a state court may later reject it, and federal courts must then follow the state court.
- Believing federal courts apply only federal law. In a state-law case the rule of decision is the state’s, while the manner of proceeding is federal.
- Treating “substantive or procedural” as a label. The question is functional: whether the difference would change who wins or invite forum shopping.
- Forgetting choice of law. A federal court sitting in a state applies that state’s choice-of-law rules (Klaxon), which may point to another state’s law.
- Confusing it with a federal-question case, where the federal court declares federal law and nobody is predicting anything.
A worked example
The facts are invented
Dana lives in the invented state of Calder and sues Hartman Tools, a company from another state, in a federal court in Calder. Jurisdiction rests on the parties’ different citizenship. The only contested question is whether Calder law allows recovery of lost earnings where a ladder’s maker was only slightly careless. Calder’s Supreme Court has never decided it. Two Calder intermediate courts have said yes.
The federal judge does not ask what rule would be best in the abstract, and she does not apply a rule of her own. She asks what the Calder Supreme Court would most likely do. The two intermediate decisions point toward yes, so she predicts yes, and Dana can recover. A year later the Calder Supreme Court, in another case, says no. From then on every federal court in Calder must follow that answer, and if Dana’s case is still on appeal the appeals court applies it. The earlier prediction was an informed guess, now shown to be wrong.
Try it
In a diversity case a federal appeals court predicts that a state’s supreme court would allow a certain claim. A year later the state’s supreme court decides the same question the other way. What follows?
Landmark authorities
Read the sources themselves; this list is a starting point.
- Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938)
- Swift v. Tyson, 41 U.S. 1 (1842), overruled by Erie
- Guaranty Trust Co. v. York, 326 U.S. 99 (1945)
- Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487 (1941)
- Hanna v. Plumer, 380 U.S. 460 (1965)
Where to go next
More hard concepts in United States law
- Personal jurisdiction and minimum contacts (Civil procedure)
- Claim preclusion and issue preclusion (Civil procedure)
This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. United States law is made in fifty states and in the federal system, and the rules differ between them. Each page states the usual formulation of the rule and names landmark decisions; your own state, circuit or course may use different wording. Check the primary sources before relying on any rule.